2026-10-13 23:55:39
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A new earnings season is here, with the big banks kicking us off.
Later this week, we’ll have a look at TSMC and ASML for our first signals from the AI infrastructure boom.
AI is already making waves in banking. JPMorgan CEO Jamie Dimon warned today about letting AI agents access customer accounts:
“If people are using them, they should understand the risk. […] We’re not going to allow just any outside agent to come in inside the company because that’s just too risky for clients and for JPMorgan.”
The concern goes beyond security. AI agents could eventually help consumers move their money between banks, threatening the cheap deposits that underpin their profitability. Wells Fargo CEO Charlie Scharf dismissed fears of an imminent disruption as “completely overdone.”
Four banking giants just reported $32 billion in combined quarterly profits this morning. Trading momentum is becoming uneven, but lending growth and resilient consumers continue to support earnings.
Let’s break down the results.
Today at a glance:
JPMorganChase: Lending Takes the Lead
Goldman Sachs: Equities Steal the Show
Wells Fargo: Bigger Isn't Better Yet
Citigroup: Turnaround Gains Ground
Did you miss it? I put together a guide to finding quality stocks with 100x potential.
As a reminder, banks make money through two main revenue streams:
💵 Net Interest Income (NII): The difference between interest earned on loans (like mortgages) and interest paid to depositors (like savings accounts). It’s the primary source of income for many banks and depends on interest rates.
👔 Noninterest Income: The revenue from services unrelated to interest. It includes fees (like ATM charges), advisory services, and trading revenue. Banks relying more on noninterest income are less affected by interest rate changes.
Here are the significant developments shaping Q3 FY26:
📊 The trading boom splits: Equities remain on fire, led by Goldman Sachs (+72% Y/Y) and JPMorgan (+49%). But fixed-income trading declined at both banks as higher bond yields weighed on activity. Citi bucked the trend with 4% growth. Wall Street’s trading windfall is becoming increasingly uneven.
🏦 Higher rates cut both ways: JPMorgan raised its FY26 net interest income outlook to $106.2 billion, while Citi also lifted its guidance. Wells Fargo, however, held its outlook unchanged. Higher rates support lending income but also raise funding costs and create losses on existing bond holdings.
💳 Consumers keep spending: Card spending grew 10% at JPMorgan and 13% at Citi, while credit losses remained manageable across the group. Businesses are also holding up, supported by strong balance sheets and investment in AI infrastructure. Despite sticky inflation and higher borrowing costs, the anticipated credit deterioration has yet to materialize.
🎯 Profitability takes center stage: Citi raised its FY26 return target above 11% as its restructuring delivers results. Wells Fargo continues expanding its balance sheet after the removal of its asset cap, but revenue growth remains modest. The next challenge is converting growth into sustainable profits without letting expenses or funding costs erode the gains.
🔑 Takeaway: The banks are still growing, but the easy gains from the capital-markets boom are fading. Strong lending activity and healthy credit provide a solid foundation, while the divergence in trading and margins highlights how differently each franchise is positioned. Can earnings growth outlast the unusually favorable conditions of the past few quarters?
Let’s visualize them one by one and highlight the key points.
Net revenue grew 8% Y/Y to $50.2 billion ($0.3 billion miss):
Net interest income (NII): $27.0 billion (+13% Y/Y).
Noninterest income: $23.1 billion (+3% Y/Y).
Net income: $15.3 billion (+6% Y/Y).
Adjusted EPS: $5.75 ($0.19 miss), excluding $658 million in investment securities losses. Reported EPS was $5.57.
Key developments:
📉 Trading momentum fades: Trading revenue grew 15% Y/Y to $10.3 billion but missed expectations. Equities surged 49% to $5.0 billion, JPMorgan’s best third quarter ever, while fixed-income trading declined 4% to $5.4 billion. Investment banking fees rose 14% to $3.0 billion but fell sequentially as dealmaking slowed in September. Wall Street activity is cooling after an exceptional Q2.
🏦 Interest income surprises: NII rose 13% to $27.0 billion, prompting JPMorgan to raise its FY26 outlook to ~$106.2 billion (from ~$105.5 billion). Management also introduced a 2027 base case of ~$107 billion in NII excluding Markets, up ~10% from its FY26 estimate of $97.2 billion on the same basis. Loan growth and higher rates are strengthening the bank’s core earnings engine.
💳 Consumers remain resilient: Consumer banking revenue grew 9% to $21.2 billion, helped by 10% growth in card spending. JPMorgan added more than 650,000 net new checking accounts. The card net charge-off rate improved to 2.91% (from 3.34% in Q2), while management maintained its FY26 forecast of ~3.2%.
⚠️ Credit quality holds up: Credit-loss provisions fell 19% Y/Y to $2.7 billion, while net charge-offs declined to $2.2 billion. Consumer loan charge-offs improved to 1.27% (from 1.42% in Q2), while wholesale losses remained low at 0.11% (from 0.10%). However, JPMorgan added $452 million to wholesale reserves, reflecting loan growth and some changes in borrower credit quality.
💰 Buybacks slow sharply: JPMorgan repurchased just $1.1 billion of stock (from $6.7 billion in Q2), despite its new $50 billion authorization. Management favors investing in the franchise and supporting client lending over repurchases. With a 13.9% CET1 ratio, the slowdown appears to be a capital allocation choice rather than a constraint.
📈 Wealth management expands: Revenue rose 14% to $6.9 billion, supported by $263 billion in client asset net inflows. Assets under management reached $5.2 trillion (+13%), while total client assets climbed to $7.9 trillion (+15%). Growing fee-generating assets help diversify earnings beyond lending and trading.
💸 Expenses keep rising: Costs increased 12% to $27.3 billion, prompting JPMorgan to raise FY26 adjusted expense guidance to ~$108.6 billion (from ~$107.5 billion). Higher compensation, technology, and marketing spending drove the increase. Costs are growing faster than revenue, pressuring operating leverage despite healthy business activity.
🔑 Takeaways: JPMorgan’s earnings miss reflects weaker capital markets activity rather than broad deterioration. Rising NII, resilient consumers, and continued loan growth provide an offset. The decision to sharply reduce buybacks suggests management sees more attractive opportunities to deploy capital within the business.
Key quote:
CEO Jamie Dimon:
“Large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface.”
2026-10-10 22:04:00
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
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📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🥤 PepsiCo: International Takes Over
🛩️ Delta: Fuel Eats the Upside
🍺 Constellation: SpikedAde Joins the Mix
🌿 Tilray: BrewDog Carries Growth
PepsiCo’s Q3 revenue rose 6% Y/Y to $25.3 billion ($310 million beat), with core EPS of $2.34 ($0.04 beat). Organic revenue growth accelerated to 3.1%, its fastest pace since late 2023, helped by 3% beverage volume growth and 1% food volume growth.
The divergence between North America and the rest of the world keeps widening:
International organic revenue grew ~8%, with EMEA up 9%. International now generates roughly 45% of PepsiCo’s profit year-to-date.
North American Foods sales were flat, though volumes improved to low-single-digit growth after last year's declines.
North American Beverages weakened, with CEO Ramon Laguarta admitting PepsiCo is “not competing well in soft drinks,” even as hydration and energy remain stronger.
GLP-1s and changing eating habits are pushing PepsiCo toward smaller portions and more protein- and fiber-focused products. Its “permissible” portfolio (better-for-you snacks) has already grown to roughly $3 billion, but it remains small relative to the traditional snack business under pressure.
PepsiCo also has an execution problem in its home market. Management plans to increase brand investment while cutting structural costs, and it is even open to selling more of its company-owned bottling operations to independent partners, making the business less capital-intensive.
Margins are getting harder to protect. Core operating profit grew 3%, but a $178 million tariff refund added roughly four percentage points to operating profit growth. Commodity costs are rising as hedges roll off, while PepsiCo is deliberately maintaining higher advertising spending to rebuild momentum.
PepsiCo now expects about 3% organic revenue growth in FY26, while cutting core constant-currency EPS growth to 2.5%–3.5% (from 4%–6%).
Takeaway: International is increasingly carrying PepsiCo while the North American turnaround takes longer than expected. With costs rising and US execution still uneven, management is moving beyond price tweaks toward a broader cost and operating-model reset.
2026-10-09 20:04:35
Welcome to the Free edition of How They Make Money.
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In case you missed it:
A 100-bagger is a stock that returns 100 times your initial investment.
Put in $10,000 and, eventually, you have $1 million.
Naturally, most investors focus on the first challenge: finding one.
But that is only half the battle.
In his book 100 to 1 in the Stock Market, Thomas Phelps showed how long it takes for compounding to turn an investment into a 100-bagger.
A stock compounding at 20% annually needs roughly 25 years to return 100 times your money. Even at an extraordinary 36% annual return, it still takes about 15 years.
And time is only part of the challenge.
Over those 15, 20, or 30 years, even the greatest winners can suffer brutal drawdowns. Apple endured repeated declines of more than 25% on its way to becoming a massive long-term winner, including two drops of roughly 80%.
Finding the right company is hard.
Holding it for 15, 20, or 25 years may be even harder.
I put together a free 35-page report on how to identify potential 100-baggers before they become obvious.
You will learn the following:
📊 What to look for
💯 A history of 100-baggers
🔎 Why they’re so hard to find
🧠 The mindset required to hold one
✅ A practical 100-bagger checklist
A stock appreciates over time through two main forces:
Earnings growth: The business makes more money.
Multiple expansion: Investors pay more for each dollar of earnings.
Over long periods, earnings do most of the work. But exceptional companies can benefit from both. As profits compound and the market finally piles in, the valuation can get overextended.
That success creates the temptation to sell.
Once a stock has doubled or tripled, our natural instinct is to lock in the gains. If the valuation has expanded along the way, selling can feel even more prudent.
But extraordinary returns are heavily back-loaded. At a 20% annual return, an investment goes from roughly 38x after 20 years to nearly 100x after 25.
Those final five years create more wealth than the first 20 combined.
That is why selling a great company too early can be one of the most expensive mistakes an investor makes. Peter Lynch famously described this as “cutting the flowers and watering the weeds.”
The best businesses have a habit of repeatedly exceeding expectations. What looks expensive today can look much more reasonable several years later if earnings keep compounding.
Selling also creates another problem.
What do you buy instead? And when do you get back in?
None of this means you should never sell. If the competitive position deteriorates, earnings falter, or the original thesis breaks, the decision changes.
But I’ve adopted a simple rule:
A rising stock price is never a reason to sell on its own.
Compounding is beautiful. You have to resist the urge to interrupt it.
Stock returns are not evenly distributed.
In statistics, you’ll hear about two common patterns:
Normal distribution: Most observations cluster around the average, while extreme outcomes are rare. Think human height or many natural measurements.
Power law distribution: A small number of extreme outcomes account for a disproportionate share of the total. Think wealth, company size, or venture returns. Extreme outcomes occur far more often than under a normal distribution, creating a fat tail.
Investing follows the power law. More than a century of market history shows that a relatively small number of stocks have created a disproportionate share of long-term wealth.
That is why constantly rebalancing can work against you.
If one stock compounds much faster than the rest, it will naturally become a larger part of the portfolio. That concentration can feel uncomfortable and make the portfolio look weird.
But it may simply be the consequence of owning something exceptional.
If you repeatedly trim your best performers, you risk systematically cutting exposure to the very companies that can make the portfolio outperform.
Warren Buffett has famously allowed investments such as Coca-Cola and American Express to become very large positions rather than continually trimming them. Apple eventually grew to nearly half of Berkshire’s listed stock portfolio before Buffett began meaningfully reducing the position.
Robert Kirby captured the same idea with his Coffee Can Portfolio.
He once discovered that a client’s husband had quietly copied each of his stock recommendations, investing about $5,000 in every company. But with one crucial difference: he never sold.
Years later, the portfolio contained plenty of mediocre investments. But one position had grown so dramatically that it was worth more than the rest of the portfolio combined.
Kirby described the approach as being “passively active.”
Active: Do the work upfront. Select the businesses carefully and decide what deserves your capital.
Passive: Once you own them, give them time to compound.
Long-term investing demands active selection followed by patient ownership.
I can see that distribution clearly in App Economy Portfolio, the real-money portfolio I’ve shared publicly for the past decade.
A dozen holdings have compounded 5x, 10x, or 20x.
That creates a powerful asymmetry. Without leverage, a loser can cost you at most 100% of your investment. But a 10x or 20x winner can more than offset many losers.
You can see that in the visual below. Even holdings that were nearly wiped out look small next to the biggest winners.
AMD is an extreme example for me. I bought my first shares at $11, and they’ve appreciated roughly 60-fold since 2017. The return shown above is lower because I kept adding at higher prices rather than trimming as the stock rose.
Had I continually rebalanced AMD back toward its original weight, I would have systematically reduced my exposure to one of the best investments in the portfolio.
Your portfolio’s shape should reflect its performance over time.
Give your biggest winners room to run.
The Coffee Can approach makes even more sense when you look at how stock returns are actually distributed.
Blackstar Funds studied roughly 8,000 US stocks traded on the NYSE, AMEX, and Nasdaq from 1983 to 2006.
The most striking finding was that roughly 25% of stocks accounted for all of the market’s gains. The remaining 75%, collectively, contributed nothing.
The distribution underneath was brutal:
Around 40% of stocks lost money over their lifetimes.
Roughly one in five lost at least 75%.
And simply beating the market was rare:
64% underperformed the Russell 3000 over their lifetimes.
Only about 6% beat the index by more than 500%.
The lesson is uncomfortable but important: most stocks are not great long-term investments.
In a 20-stock portfolio, some will disappoint, and many will be merely average. Fewer than a handful may ultimately drive most of the return.
The problem is that you rarely know which ones in advance.
Selling a winner can mean trimming the very stock you needed most.
You only need a few great investments. The hard part is not getting in their way.
The secret to long-term investing lies in building a strategy you can stick with for decades, rather than guessing what the market will do next.
There will always be a reason to sell. A recession. A valuation scare. A new competitor. A market correction. But nobody knows what will happen next.
Long-term investing ultimately requires optimism that great businesses will keep adapting, growing, and creating value, despite the uncertainty.
Patience and persistence are among the most precious virtues in investing.
And you need both even if you are lucky enough to find the investment of a lifetime.
Sometimes the hardest thing is simply to leave a great investment alone.
Finding the winner is only the beginning. You have to let it get there.
That's it for today.
Happy investing!
Disclosure: I own AMD, ANET, AAPL, SHOP, and NVDA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-10-06 20:02:19
Welcome to the Premium edition of How They Make Money.
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OpenAI used DevDay last week to unveil more than 20 products and features. The most important announcement was Dots.
Dots are always-on AI agents with their own cloud computer, access to more than 4,000 apps, and the ability to keep working toward your goals even when you are not actively prompting them. Sam Altman described the shift as a “whole new way to work with AI” and a new set of “superpowers.”
The contrast with Meta Connect was striking. Meta showed Muse booking trips, shopping, and handling everyday tasks. OpenAI showed Dots managing projects, coding, preparing documents, coordinating across Slack and Teams, and helping run a startup.
For now, the two companies are attacking the agent market from opposite ends.
Meta is pushing toward AI for everyone.
OpenAI is starting with AI for high-value work.
And that difference may explain where ChatGPT is heading next.
Today at a glance:
The pieces start to fit together
OpenAI wants to become the operating layer
The business model gets more interesting
The cost of autonomy
Who owns the workday?
Some of the most interesting opportunities emerge in smaller, undercovered businesses that institutions and analysts barely follow.
I’m working on a new way to help you find them before they become obvious.
Spots will be strictly capped at launch.
OpenAI has spent the past year turning ChatGPT into much more than a chatbot, but the pieces have not always fit together cleanly.
ChatGPT started as the conversational interface.
Codex became the place for agentic coding, organized around projects and files.
ChatGPT Work extended that model to broader knowledge work, adding connections to SaaS apps and a persistent cloud environment.
More recently, OpenAI has started pulling those experiences into the same product.
The result is powerful, but increasingly complicated. You can have several projects, agents, threads, apps, and tasks running at once. At some point, the bottleneck becomes the person trying to keep track of it all.
That’s where Dots fit.
A Dot sits above your individual tools as a coordinating layer. It remembers what you are working on, follows projects over time, and can coordinate work across them. It acts like a control tower for your AI work.
The shift matters because the more work OpenAI hosts on its own cloud computers, the more persistent the relationship becomes. A chatbot conversation is relatively easy to move between providers. Recreating a collection of projects, files, permissions, preferences, and ongoing agents somewhere else is much harder.
In other words, Dots could make ChatGPT both easier to use and harder to leave.
2026-10-03 22:00:55
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🌐 Accenture: AI Creates More Work
👟 Nike: Still Going Downhill
🛳️ Carnival: Europe Comes Back
🎿 Vail Resorts: Pass Sales Slide
Accenture Q4 revenue rose 6% Y/Y to $18.7 billion ($660 million beat), with GAAP EPS of $3.29 ($0.11 beat).
Demand rebounded to a new high. New bookings grew 5% in local currency to $22.2 billion, reversing last quarter's decline. Managed services bookings hit a record $12.8 billion. Shares surged nearly 20% initially, their best post-earnings move on record.
So far, AI is creating more work for Accenture than it is destroying. Consulting revenue grew 6% (or 7% in local currency), and nearly 100 additional clients started their first advanced AI projects during Q4, bringing the FY26 total above 400. Management says much of the demand is coming from companies building the data foundations, digital core, and AI infrastructure needed before deploying agents at scale.
The economics are changing, though. Accenture acknowledged lower pricing in many parts of the business as AI improves productivity and competition intensifies. Hiring will also slow in FY27 as AI changes delivery. So the disruption thesis isn’t disappearing, but it’s showing up first in pricing and labor intensity rather than collapsing demand.
M&A remains another major growth lever. Accenture deployed $1.9 billion in Q4. The previously announced OT-security deals have now closed, and management expects roughly $5 billion of acquisitions in FY27. It also plans to return at least $9.5 billion to shareholders.
For FY27, Accenture guided to 3%–6% revenue growth in local currency. That said, acquisitions are expected to contribute 2%–2.5% to growth, so the organic outlook is considerably more subdued than the headline range.
Takeaway: The quarter doesn’t settle the AI disruption debate, but it brings some much-needed good news. Bookings rebounded, and more enterprises are hiring Accenture to build the infrastructure required for AI. The real pressure may increasingly show up in pricing and headcount rather than demand disappearing altogether.
Nike Q1 revenue fell 4% Y/Y to $11.2 billion ($110 million miss), while EPS slipped 2% to $0.48 ($0.04 beat). Gross margin improved 60 bps to 42.8%, thanks to lower warehousing and logistics costs.
Nike’s performance portfolio remains encouraging. Running, football, training, and basketball collectively grew at a high-single-digit rate, suggesting Elliott Hill’s Sport Offense is gaining traction. But competitive pressure has intensified. Kylian Mbappé recently ended a two-decade relationship with Nike to join On (visualized here), which is now using him to launch its own football business in 2027.
North America was also the only major geography to grow. Elsewhere, the reset remains painful. Nike Sportswear fell by low double digits, while management acknowledged it had oversupplied Jordan retros and is now deliberately reducing launch volume to restore scarcity. NIKE Direct declined 8%, including a 13% drop in digital, while wholesale slipped 1%.
Greater China revenue fell 22% (or 26% in constant currency) to $1.18 billion, with wholesale down 28%. Nike is intentionally reducing promotions and narrowing its digital distribution there, which should improve brand health eventually. But it also means the reset will weigh on revenue for longer.
2026-10-02 20:00:54
Welcome to the Free edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
Anthropic’s IPO prospectus hasn’t officially landed yet, but Reuters obtained a leaked draft this week, giving us the first real look inside one of AI's most extraordinary growth stories.
A few numbers already stand out:
Revenue reportedly reached ~$4.6 billion in 2025, up 12x Y/Y.
Compute and infrastructure spending topped $7 billion.
Nearly half of revenue came through AWS and GCP, showing how Amazon and Google are simultaneously investors, infrastructure providers, distributors, and competitors.
Much more is hidden beneath those numbers, including customer concentration and cash burn. Anthropic has also agreed to spend at least $518 billion on future compute and infrastructure over the next decade, with roughly 80% of those commitments reportedly non-cancellable. I’m waiting for the public S-1 before doing the full teardown. Stay tuned for Anthropic visualized! 📊
Today at a glance:
🏢 Meta’s enterprise push
☁️ Micron raises the floor
Most of the businesses I cover are already firmly on investors’ radar.
But there’s another part of the market I don’t cover nearly enough.
I’ve been working on something new that fills that gap.
Access will be limited when it opens. Join the priority list to hear it first.
Meta spent the past few weeks showing what AI could mean for consumers.
This week, it turned to businesses.
On Monday, Meta unveiled Meta Enterprise Platform, which Zuck called the company’s “next major pillar.” The new division will bring several pieces of Meta’s AI stack under one roof for businesses and developers, including:
Muse, its personal AI agent
Meta Business Agent
Muse API
Muse Code
Meta’s underlying models and infrastructure
Meta also hired MongoDB CEO CJ Desai to lead the effort. Desai previously ran product and engineering at Cloudflare and spent nearly eight years at ServiceNow. He brings Meta deep enterprise software experience at the top, something it has historically lacked.
The announcement was ambitious enough to rattle the software sector. Salesforce, ServiceNow, Oracle, Adobe and other enterprise names sold off as investors contemplated another hyperscaler moving up the software stack.
That reaction may prove premature.
Building the technology is only part of enterprise software. Large customers also require long sales cycles, procurement, security reviews, integrations and implementation support. Meta has spent decades building consumer products and advertising tools, not selling mission-critical software to CIOs.
That’s why Tuesday’s announcement may be more interesting.
Meta introduced Muse for Small Business, allowing companies to connect the agent to tools they already use, including Shopify, QuickBooks, Stripe, Canva, Slack, Notion, Figma, and Zoom, alongside their Facebook and Instagram business accounts.
The opportunity is not necessarily to replace those applications. It’s to sit above them.
A small business owner could ask Muse to understand why sales slowed, identify customers worth targeting, prepare new creative, and coordinate the work across several apps. Meta says actions involving publishing, sending, or spending still require approval.
That’s a much more natural fit for Meta. The company already works with more than 200 million businesses, primarily because they want access to customers on Facebook and Instagram. Many are small enough that the owner is simultaneously the marketer, operator, salesperson, and finance department (like yours truly).
An AI agent that can help across all four functions could be genuinely useful.
It also extends the same thesis we discussed last week without requiring Meta to win an entirely new market.
For consumers, Muse wants to become the interface to the internet
For businesses, it wants to become the interface to the software stack
The applications underneath may remain the same. What changes is who controls the layer where users express intent.
Meta is also pushing this aggressively for financial reasons.
The company is spending more than $100 billion on AI infrastructure this year. In previous earnings calls, almost every path to monetization eventually came back to advertising, leaving investors skeptical about how broadly Meta could monetize that spending. Enterprise software gives Meta another way to earn a return on the same models, agents, and compute.
Its AI monetization stack is quickly expanding:
Advertising monetizes attention
Subscriptions monetize heavy users
Commerce could monetize transactions
Business software could monetize the AI stack itself
💡 Takeaway: None of this means Meta suddenly becomes Salesforce or ServiceNow. But it is starting to turn its massive AI investment into businesses that extend beyond advertising. Enterprise is the boldest ambition, while small business looks like the lowest-hanging fruit given Meta’s existing customer relationships and distribution.
Micron closed fiscal 2026 with another extraordinary quarter.
Revenue surged 379% Y/Y and 31% Q/Q to $54.2 billion ($2.7 billion beat).
Adjusted EPS: $33.42, up from $3.03 a year ago ($1.60 beat).
Gross margin: 87%, up from 85% in Q3.
Operating cash flow: $44.0 billion, while free cash flow reached $33.2 billion.
Q1 FY27 guidance: Revenue of ~$61.5 billion (+351% Y/Y; ~$3.6 billion beat) and adjusted EPS of ~$38.15 (~$2.23 beat).
The scale is becoming difficult to process. Micron generated $133 billion of revenue in FY26, up from $37 billion a year earlier, while adjusted gross margin jumped to 81%. It ended the year with nearly $74 billion of cash and investments after producing more than $62 billion of adjusted free cash flow.
The growth is broadening beyond HBM. Core Data Center revenue reached $18.0 billion in Q4, up 56% sequentially, while Cloud Memory climbed to $16.3 billion. Even Mobile and Client posted a remarkable 90% gross margin, showing how far the memory shortage has spread beyond AI accelerators.
The key update was management’s view that the memory shortage is worsening.
Micron now expects supply-demand conditions in fiscal 2027 and 2028 to be tighter than they were in 2026, with no clear line of sight to when the market returns to balance. That matters because the biggest risk after this kind of earnings explosion is usually obvious: supply catches up, pricing rolls over, and the memory cycle turns.
Micron is also making more progress on the multi-year contracts we discussed last quarter. It now has 26 Strategic Customer Agreements, up from 16, with roughly $32 billion of customer commitments. These agreements cover more than 35% of revenue through 2030, and about three-quarters of that revenue includes defined pricing frameworks. The goal is to make the next downcycle less violent than the last one.
At the same time, Micron is spending aggressively to add capacity. CapEx reached $27 billion in FY26 and is expected to rise further, including roughly $25 billion in the first half of FY27 alone. But much of that new clean-room capacity will not arrive until 2028 and beyond, which helps explain why management still sees such a tight market.
Despite the extraordinary numbers, Micron still trades at a single-digit forward earnings multiple. The market is effectively saying these margins and earnings cannot last.
That skepticism is understandable. Memory has always been cyclical, and an 87% gross margin looks like the kind of number investors normally associate with a peak.
But Micron is trying to change the evidence investors use to make that judgment:
Long-term customer agreements are replacing annual handshakes.
Customers are putting down billions in deposits and guarantees.
Supply remains constrained well into 2027 and 2028.
AI is increasing memory intensity across data centers, PCs, phones, and eventually physical AI.
The key question is no longer whether Micron is having an extraordinary cycle. It clearly is. The question is whether this cycle has become structurally different enough to deserve a different multiple.
💡 Takeaway: Micron just delivered the kind of quarter that would normally scream peak cycle. Yet supply is getting tighter, customer commitments are getting longer, and FY27 guidance is still moving higher. The market is still pricing Micron like memory eventually reverts to the old playbook. The question is whether AI has changed that playbook enough to justify a different multiple. Just remember the four most dangerous words in investing: “this time is different.”
That's it for today.
Happy investing!
P.S. I’m working on something new for investors looking beyond Big Tech.
Disclosure: I own AMZN, GOOG, and META in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.